Mihlfeld & Associates v. Bishop & Bishop

• Decision Date: 10 August 2009
• Docket Number: No. SD 29622.,No. SD 28885.,SD 28885.,SD 29622.
• Citation: 295 S.W.3d 163
• Parties: MIHLFELD & ASSOCIATES, INC., and Global Transportation Systems, Inc., Plaintiffs/Appellants/Respondents, v. BISHOP & BISHOP, L.L.C., Bishop Enterprises, and William Bishop, Defendants/Respondents, and Michael Rootes, Defendant/Respondent/Cross-Appellant.
• Court: Missouri Court of Appeals

295 S.W.3d 163

MIHLFELD & ASSOCIATES, INC., and Global Transportation Systems, Inc., Plaintiffs/Appellants/Respondents, v. BISHOP & BISHOP, L.L.C., Bishop Enterprises, and William Bishop, Defendants/Respondents, and Michael Rootes, Defendant/Respondent/Cross-Appellant.

No. SD 28885.

No. SD 29622.

Missouri Court of Appeals, Southern District, Division Two.

August 10, 2009.

Motion for Rehearing and Transfer Denied August 31, 2009.

Rodney H. Nichols and John E. Price, Carnahan, Evans, Cantwell & Brown, P.C., Springfield, MO, for Appellants.

Joseph L. Johnson and Bryan Berry, Lathrop & Gage, L.C., Springfield, MO, for Respondents Bishop & Bishop, Ent., and William Bishop.

Gregory Groves, Lowther Johnson, Springfield, MO, for Respondent Michael Rootes.

GARY W. LYNCH, Chief Judge.

Mihlfeld & Associates, Inc. ("Mihlfeld") and Global Transportation Systems, Inc. ("GTSI") (collectively "Appellants") brought the underlying action, seeking to enforce restrictive covenants and non-competition provisions contained in written employment agreements against two former employees, William Bishop ("Bishop") and Michael Rootes ("Rootes"), and a competing company founded by Bishop and his wife, Bishop & Bishop Enterprises, LLC ("Bishop Enterprises") (collectively "Respondents"). The cause was tried before the trial court on Appellants' second amended petition and resulted in the trial court's judgment¹ entered on October 30, 2008. The judgment awarded Appellants permanent injunctive relief against Rootes and Bishop and awarded Mihlfeld money damages on several of its claims.² Appellants raise five points in their appeal related solely to the issue of the various damages either assessed or not assessed by the trial court. On Appellants' third point, we reverse and remand to the trial court with directions to award Mihlfeld attorney fees against Rootes, pursuant to his employment agreement. This Court finds no merit in Appellants' other points.

Rootes filed a cross-appeal, claiming that the trial court erred when it entered a permanent injunction in the same form as the preliminary injunction without limiting it to the contractual time period of the restrictive covenants in Rootes's employment agreement. This Court agrees and reverses and remands the judgment to the trial court with directions to issue an injunction in a manner that limits the restriction to the time period as agreed to by the parties in Rootes's employment agreement. Additionally, Rootes challenges the trial court's assessment of damages against him in two respects. His second point alleges that the trial court erred in awarding Mihlfeld the sum of $3,315.00 in damages against him in both Counts VI and VII. This Court finds, however, that the awards properly compensate Mihlfeld for two separate injuries. Rootes's third point on appeal challenges the trial court's award to Mihlfeld of both liquidated damages under Count V and actual damages of $7,183.00 for disclosing an agency agreement under Count VII. Finding that this portion of the damage award in Count VII compensates Mihlfeld for an injury contemplated by the liquidated damages awarded under Count V for breach of the employment agreement, this Court reverses that portion of the judgment on Count VII as to Rootes.

Factual and Procedural History

Mihlfeld is a Missouri corporation, located in Springfield, Missouri, which engages in the business of third-party logistics management and provides all services to its clients from its office in Springfield. GTSI, also a Missouri corporation, operates as a freight broker, and generally is used to coordinate difficult shipments or shipments on particular lanes for some of Mihlfeld's customers. These two companies share common ownership and office space. Marshall Mihlfeld is the president of both companies.

In 1994, Marshall Mihlfeld hired Bishop to work as a sales representative and account manager for Mihlfeld. Bishop was employed under the terms of an employment agreement that contained a non-competition clause. Bishop later became vice president of both Mihlfeld and GTSI, and was a shareholder of both companies until he was terminated in August 2004.³

Although originally hired as a sales representative, Bishop's job duties with Mihlfeld evolved and expanded over time. Beginning in January 2003, Bishop began running the day-to-day operations of Mihlfeld and GTSI. From January 2003 until late July 2004, Bishop generally oversaw all operations within the company, including sales staff. There was no information about Mihlfeld or GTSI to which Bishop did not have access. Bishop's responsibilities included setting company policy, including requiring all sales and management staff to sign employment agreements with non-solicitation and non-competition provisions.

In January 2002, Rootes was hired by Appellants as a sales representative and executed an employment agreement. That agreement had three provisions pertinent to this appeal. First, it prohibited Rootes from disclosing Appellants' internal and/or proprietary information to third parties and from misappropriating, misusing, and/or disclosing Appellants' confidential and proprietary information, including that which was maintained in Appellants' computer database. Second, it prohibited Rootes, for a period of three years from the date his employment with Mihlfeld ended, from contacting any of Mihlfeld's actual or in-process⁴ customers or from working for a competitor. Third, it contained a liquidated damages provision, which provided that in the event Rootes breached the agreement, Appellants would be entitled to liquidated damages in the amount of $200.00 for each day that he breached the agreement and, in addition, recovery of their reasonable attorney fees. The trial court found that the three-year time limitation, the geographic scope of the restrictive covenants, and the liquidated damages provisions in the employment agreement were reasonable under the circumstances. These findings are not challenged in this appeal.

While employed by Appellants and after Bishop was terminated by Appellants, Rootes provided Bishop with copies of Mihlfeld's and GTSI's internal documents, including Mihlfeld's logistics survey and limited agency agreement ("agency agreement"). Appellants were unaware that Rootes had provided these documents to Bishop and did not authorize Bishop's use of the documents. In addition to providing Bishop with Appellants' internal documents, Rootes, while still employed by Appellants, also referred some of Appellants' in-process customers to Bishop Enterprises.

From November 2005 through Rootes's termination by Appellants in March 2006, Rootes conducted business activities with Bishop for the benefit of Bishop Enterprises. In November 2005, Rootes and Bishop Enterprises split the cost of a subscription agreement to Selectory Online, a customer-lead database operated by a third party, which both Rootes and Bishop could utilize to contact prospective customers. In February 2006, Rootes downloaded customer-lead information from Mihlfeld's computer database and sent the information to himself as attachments in e-mails. Finally, on February 26, 2006, Bishop offered Rootes a job as a sales representative with Bishop Enterprises. Rootes accepted the job the next day, although he did not start until after he was terminated by Appellants.

In February 2006, Appellants became aware that Rootes had not procured a sale for them since before November 2005 and advised Rootes that he had thirty days within which to obtain a contract with a customer or he would be terminated. On March 17, 2006, Appellants locked Rootes out of Appellants' computer database and on March 20, 2006, advised Rootes that his employment was terminated. Rootes immediately began working for Bishop Enterprises.

One of the items that Rootes e-mailed to himself while working for Appellants contained a list of more than 1,500 of Appellants' in-process accounts. While working at Bishop Enterprises, Rootes contacted at least thirteen of the names on this list.

In August 2006, Appellants filed their petition initiating this action and requested a temporary restraining order to bar Rootes's and Bishop's continued use of Appellants' proprietary information. On August 11, 2006, a temporary restraining order, effective for fifteen days, was entered prohibiting Rootes and Bishop from, among other things, using or disclosing Appellants' confidential and proprietary information and prohibiting Rootes from contacting any of Appellants' existing or in-process accounts. The restraining order was extended for two additional fifteen-day periods by agreement of the parties. On September 21, 2006, the parties appeared and agreed to the entry of a preliminary injunction. The preliminary injunction contained the same prohibitions as those in the temporary restraining order and was to remain in effect "until further Order of the Court." A three-day trial began on April 11, 2007. Before any evidence was heard, Rootes stipulated to the injunctive relief being made "permanent throughout the remaining term of [Rootes's] covenant not to compete."

At trial, Appellants sought substantial damages representing the value of data misappropriated, compensation paid to Rootes after November 21, 2005, costs expended by Mihlfeld to develop the agency agreement and logistics survey, lost profits, lost sales opportunity, lost goodwill, trial expenses, punitive damages, and attorney fees; altogether, Appellants sought more than $4 million in damages.

The case was tried on Appellants' second amended petition, which contained fourteen separate counts. Two counts were abandoned at trial, and three counts were settled before the trial began. In its judgment, the trial court adopted most of Appellants' proposed findings of fact and entered conclusions of law finding in favor of Appellants on six counts and in favor of Respondents on the three remaining counts.

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